Tariff and payment adjustments 2022-23

NHS England and NHS Improvement

Tariff and payment adjustments, 2022/23

6 September 2021

2 |2 |

• This webinar is part of our engagement on potential policies for 2022/23.

• It is intended to support the series of engagement workshops that are running throughout September.

• It is focussed on some of the payment and tariff policies that we are considering for 2022/23 – it is not

discussing the financial arrangements that will be in place for 2021/22.

• You can ask questions using the chat box and we will address as many of them as we can.

• The session will be recorded and will be available to view after the event.

Please note: We are discussing, and seeking views on, policies in development, not final

proposals. We will continue to work towards the statutory consultation on the 2022/23 tariff.

Speakers:

• Rob Unsworth, Head of Payment Policy

• Mat Marsh, Payment Development Manager

• Alastair Brett, Senior Engagement Manager

About this webinar

Context for NHS finances and payment for 2022/23

3 |3 |

• Policies being considered for 2022/23 are shaped by three important contexts:

• COVID-19 – in particular, the NHS response to the pandemic, the financial arrangements

implemented as part of that response, and now the need for NHS financial architecture to

support recovery and address the backlog

• The Health and Care Bill – central to the legislation is Integrated Care Boards (ICBs) being

established as statutory bodies, crystalising the shift from competition to collaboration as the key

driver of improvement for the NHS

• The NHS Long-Term Plan – continues to be the plan that we are working to. This includes the

LTP commitment to payment system reform and moving away from activity-based payments to

ensure a majority of funding is population based.

• We are also working to ensure that health inequalities are carefully considered in all our work, and the

policies we will choose to propose.

• We’re anticipating setting the national tariff for one year – 2022/23. We feel that there is too much

uncertainty for to set it for longer.

• The starting point for 2022/23 will be the 2021/22 national tariff, including the aligned payment and

incentive blended payment arrangements that cover almost all secondary healthcare services. That

will be covered in more detail in the workshops.

Introduction and context

2022/23 NHS finance and payment engagement

4 |4 |

Publication of 2021/22 national tariff is still planned for autumn 2021.

Tariff development timetable


Tariff development process

Engagement and gathering feedback on potential policies

September 2021

Statutory consultation on proposed 2022/23 tariff

December 2021/January 2022

Publication of final 2022/23 tariff (subject to consultation)

February/March 2022

2022/23 tariff takes effect

1 April 2022

5 |5 | 2022/23 NHS finance and payment engagement

Market forces factor

6 |6 |

• The market forces factor (MFF) estimates the unavoidable cost differences between healthcare

providers. It is used to adjust resource allocations in the NHS in proportion to these cost differences,

so that patients are neither advantaged nor disadvantaged by the relative level of unavoidable costs in

different parts of the country.

• In 2019/20, the data and calculation method for the MFF were updated. The data had not previously

been updated for almost ten years. The resulting changes are being introduced over a five-step

glidepath.

• The 2021/22 tariff moved to the third step of the glidepath. For 2022/23, we are considering three

options:

a. Making no changes to MFF values – maintaining the MFF values used in the 2021/22 tariff

(step three of the 2019/20 MFF glidepath).

b. Moving to the fourth step of the 2019/20 MFF glidepath – a similar change as the 2020/21

to 2021/22 tariffs as the glidepath operates in equal steps.

c. Updating the data used to calculate MFF values – implementing a new glidepath if needed

• Analysis of the MFF values produced by the updated data indicates that some providers’ values,

including some in London, would change in the opposite way to the glidepath. However, as the time

since the last update is relatively short, the changes are smaller than those in the 2019/20 update,

Market forces factor


7 |7 |

Option Pros Cons

A – hold at step 3

of current

glidepath

Avoids uncertainty and potential volatility.

Ensures organisations do not move in

opposite direction to that indicated by data

update.

MFF values do not progress towards target,

extending the length of the glidepath.

B – move to year

4 of current

glidepath

MFF moves closer to target values.

The change may be expected by

stakeholders.

Increased risk MFF values deviate from

underlying data, requiring bigger changes in the

future.

Analysis suggests that the glidepath may move

some providers’ MFF values in a different

direction to updating the underlying data.

C – update the

underlying data

for the MFF and

create a new

glidepath if

needed

MFF reflects more recent available underlying

data.

Uses 2019/20 datasets. 2020/21, and likely

2021/22, datasets will be impacted by COVID-

19 and may not be suitable to use in an MFF

update. May not be possible to update data

for some time.

Update results in smaller impacts than the

2019/20 data update.

The underlying data is from 2019/20, so would

not capture the impact of COVID-19 or Brexit.

Creating new MFF values could create

uncertainty in the challenging times of COVID-19

recovery.

Changing an active glidepath could reduce trust

in the stability of future glidepaths.

MFF options



High cost drugs and

devices

9 |9 |

• Under the financial arrangements for 2021/22, different categories of high cost drugs and devices are

reimbursed in the following ways:

• Cancer Drugs Fund, Hep C and the majority (by value) of other specialised high cost drugs are

funded on a cost and volume basis.

• Specialised drugs and devices which are not expected to be volatile in terms of uptake are

funded within provider blocks.

• CCG-commissioned high cost drugs and devices are funded within provider blocks.

• We are considering continuing with these arrangements for 2022/23:

• Funding for high cost drugs and devices commissioned by ICSs, and certain other specialised

drugs funded by NHS England Specialised Commissioning, would be included in the API fixed

element.

• The majority (by value) of other specialised high cost drugs and devices would be funded on a

cost and volume basis.

Funding high cost drugs and devices within the fixed element


10 |10 |

• Within the national tariff, some high cost drugs and devices are excluded from the calculation of unit

prices and national prices. As medical practice changes and new drugs and devices are developed

and adopted, the lists of high cost drugs and devices needs to be kept as current as practically

possible.

• The lists are reviewed each year, with nominations for additions or removals from the high cost drugs

and devices lists reviewed by expert steering groups.

• For 2022/23, nominations can be submitted until 30 September, using a form that can be downloaded

from the NHS England and NHS Improvement website:

www.england.nhs.uk/pay-syst/national-tariff/developing-the-national-tariff/#HCDD

High cost drugs and devices –exclusions from prices


https://www.england.nhs.uk/pay-syst/national-tariff/developing-the-national-tariff/#HCDD


MedTech

Funding Mandate

12 |12 |

• The MedTech Funding Mandate was introduced in April 2021 to support the uptake of NICE-approved

innovative products. The Mandate requires commissioners to pay providers wishing to use the

products it covers. At launch, there were four products on the Mandate.

• The 2021/22 national tariff rules mean that products on the MedTech Funding Mandate should be

funded separately to the tariff. However, confusion about how the products should be funded under

the block payment arrangements has led to mixed and limited uptake.

• A project group, made up of senior clinicians and relevant policy colleagues, has considered how to

better support the adoption and spread of innovations. It carried out extensive engagement and

identified a range of options:

• Do nothing: Retain the status quo on support for the policy

• Mandated fixed and variable payments

• Centrally funded approach

• Phased approach with transitional arrangements from central to local

• Locally funded approach

• Central funding was a popular option. However, it could be difficult to implement successfully (for

example, it is unclear if the ITP programme significantly increased uptake). In addition, it would also

involve reducing allocations to ICSs and creating a large admin burden, both centrally and locally.

• We are therefore considering the mandated fixed and variable payment approach.

MedTech Funding Mandate - Background


13 |13 |

• We are considering proposing a payment rule to include funding for MedTech Funding Mandate

products in aligned payment and incentive blended payment agreements, providing clear guidance

and business cases for established products, to support implementation.

• This would mean that known costs would be included in the fixed element, while the variable payment

would cater for variations from planned activity, and could also be used to incentivise specific areas

such as patient outcomes and data collection as agreed locally.

• This approach aligns better with the MedTech Funding Mandate itself, and the direction of national

payment policy towards blended payment.

• Feedback from the July engagement indicates that there is good support from stakeholders. However,

we are also seeking feedback during September.

• There are various options for implementing the payment rule, which we are engaging on:

• Include in fixed payment – with no variable payment

• Include in fixed payment – with variable payment to address variations from plan

• Include in fixed payment – with outcome-based payment adjustment (potentially +/-)

• Exclude from fixed payment and mandate pass through payment

• For more details, please join our ‘Innovation and the MedTech Funding mandate’ discussion

session on 29 September.

MedTech Funding Mandate – 2022/23 payment policy


https://www.events.england.nhs.uk/events/innovation-payment-and-the-medtech-funding-mandate


Policies with minimal

changes for 2022/23

15 |15 |

• Each national tariff includes a cost uplift factor (to reflect inflation and other cost increases) and an

efficiency factor (to drive continuous improvements in efficiency). These factors are used to adjust the

tariff prices – and providers and commissioners need to have regard to them in any local pricing

agreement.

• We are working with colleagues from across finance to review the cost adjustment factors to be

proposed for the statutory consultation for the 2022/23 tariff.

• The cost adjustments also continue to be relevant for the aligned payment and incentive agreements

and other local pricing arrangements and should be one of the key factors considered in setting any

agreement.

• We are not expecting to introduce any ‘Covid adjustment factor’ to account for changes in costs as a

result of Covid-19.

Cost adjustments


16 |16 |

• Best practice tariffs (BPTs) and CQUIN have both intended to provide financial incentives for quality of

care delivered.

• BPTs would usually increase the prices paid for care that confirmed with certain quality criteria, with

other prices for the same activity being reduced.

• The move to that aligned payment and incentive blended payment, and using fixed payments for the

majority of activity, for the 2021/22 tariff required a change in the way BPTs operated.

• Best practice tariffs have been developed with clinicians and it is important that BPT’s emphasis on

delivering the best quality care for patients is not lost. As such, BPTs were included in the aligned

payment and incentive blended payment model as part of the variable element.

• As such, in setting a fixed payment, local areas should agree the level of BPT achievement included.

Where actual achievement differs, the variable element would be adjusted accordingly.

• CQUIN achievement is also part of the variable element. However, the fixed element should be set on

the assumption of full CQUIN achievement, with deductions then made through the variable element if

this level is not met.

• For 2022/23, we are not expecting to make any changes to how BPTs and CQUIN operate, as part of

the aligned payment and incentive variable element. However, we will review individual BPTs and

CQUIN metrics to ensure they remain appropriate.

Financial incentives for quality – best practice tariffs and CQUIN


17 |17 |

• In 2019/20 £204 million was taken out of commissioner allocations, with tariff

prices being lowered accordingly, to reflect the arrangements for central funding

of the overhead costs of Supply Chain Coordination Ltd (SCCL). The aggregate

reduction was unchanged for the 2020/21 and 2021/22 tariffs.

• The exceptional additional costs relating to procurement of personal protective

equipment (PPE) as a result of the COVID-19 pandemic are largely being borne

by the commercial directorate and government departments and so would not be

expected to be covered by the amount removed from tariff.

• We are considering whether it would be appropriate to propose making no

changes to the amounts for 2022/23.

Centralised procurement


18 |18 |

• For 2022/23, we are considering whether to continue to make no changes to:

• specialised services transition path (keep on hold at 50%). The path was

introduced following the 2017/19 tariff move to prescribed specialised services

(PSS) designation of specialised services.

• specialist top-up payment rates, meaning they would remain the same as 2021/22.

• the content of PSS identification rules (IR).

Complexity adjustments and specialised services

Developing the payment system for 2021/22

19 |19 |

CNST


• For 2022/23, we are considering continuing to include CNST in tariff prices as in

previous years.

• However, we have also started some longer-term work to:

• explore policy options for reforming clinical negligence scheme for trusts (CNST)

contributions and NHS payments, so that incentives are stronger on NHS

providers to reduce clinical negligence costs, while recognising the costs that

are reasonably unavoidable due to historic claims.

• improve transparency for systems in understanding CNST contributions and

NHS payments. This includes providing direct learning from claims to systems

and enabling them to access benchmarking through the Model System platform.

• In summary, we are working to:

• improve the incentive mechanism by treating claims older than 10 years as

system costs. This will be trailed for maternity in 2023/24.

• explore options for a long-term solution for reflecting CNST in fixed payments.


Health and Care Bill:

potential changes to the

payment system

21 |21 |

The NHS Health and Care Bill contains changes relating to the payment system, including:

• Changing the name from ‘National tariff payment system’ to ‘NHS payment scheme’.

• Increasing flexibility for setting prices, allowing prices to be set as a formula as well as a £ value.

• Allowing prices to apply differently in different circumstances – enabling specification of where

national prices apply and where they don’t (eg prices to be national prices for activity outside the

scope of blended payment but not for activity within the scope).

• Allowing payment rules to be set for section 7A public health services commissioned by the NHS.

• Removing the possibility of referring to the CMA if the consultation objection threshold is met.

• Removing the local modifications clauses and replacing them with rules that determine when a

modification or variation requires approval by NHSE.

• Removing the prohibition on setting pricing rules by reference to the status of the provider (i.e.

whether NHS/public/private/charity, etc). This would allow the rules to address situations where costs

or other financial factors are applicable to one group (eg NHS providers), but not, or to a lesser extent,

others (eg independent sector providers).

Potential changes to legislation


22 |22 |

Any questions?

You can also contact us on: [email protected]


Tariff and payment adjustments 2022-23

Documents

Transcript of Tariff and payment adjustments 2022-23